Treasury Secretary Tim Geithner called AIG CEO Edward Liddy last week and told him that the firm's plans to pay about $165 million in bonuses were unacceptable. According to the Washington Post, Liddy agreed to restructure the payouts but made a point not to nix them, despite the fact the government has committed $170 billion to the company.

The government actually owns 80 percent of the company, though it has not been nationalized per se. Liddy said he found the bonuses "distasteful," but he had no choice because he was contractually bound. He said not giving the bonuses would be a litigation nightmare. He also voiced reservations about his retention efforts. The company aims to keep specialists at AIG Financial Products to manage the $1.6 trillion portfolio of toxic assets. At least the top seven execs agreed to give up their bonuses. 

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